Govt's new plan for Air India to attract buyers

Chennai: After the flop attempt to sell Air India, reports are out claiming that the Modi government is now mulling over selling the entire 100 per cent stake in the national carrier.

Earlier on 31 May, when the government failed to find any bidders, Economic affairs secretary Subhash Chandra Garg told reporters that the government would make changes to its Air India plan.

Acording to a report, the Centre is re-examining its disinvestment process for Air India. Quoting Subhash Chandra Garg, a senior official in the Ministry of Finance, the report stated that the government is considering various options and doesnt intend to insist on keeping 24 per cent of the company.

'A certain kind of strategy was offered that didnt find many takers and therefore something different will have to be done,' Garg told the publication. 'Theres no fixed objective that government should have 24 per cent. It can be re-examined,' he further said.

In April, both IndiGo and Jet Airways had said that they would not be participating in the Air India disinvestment process. IndiGo was the first to evince interest in Air India disinvestment when the government had mooted the plan last year.

The government drew a blank after it invited bids for Air India on 31 May. It called for expressions of interest in March for the strategic disinvestment of the state-owned carrier after the Cabinet Committee on Economic Affairs approved the same in 2017.

Post the failure to attract any interested bidders, the government, as per the guidelines outlined in DIPAM, had to go to the evaluation committee and also to the alternate mechanism that was specifically formed for speedy decisions on Air Indias privatisation, which civil aviation secretary RN Chaubey had said will be done in two weeks. But there is no movement as yet on the future course the government is deciding for Air India.

It is to be noted that after the government failed to attract any bids in May, it has not paid its close to 1,1000 employees salary for the month of May. In a letter dated 6 June, general manager (IR), Meenakshi Kashyap, wrote a letter to the Air India staff stating that the disbursement of salaries for the month of May is delayed and the payment is likely to be made on 15 June 15. Also on 5 June, Air India invited bids from Indian/foreign institutions/banks for a government-guaranteed short-term working capital loan of `1,000 crore to be drawn in June.

A recent CAPA report on the next steps on Air India divestment states that a successful bidder will have to absorb a couple of billion dollars of losses in enterprise restructuring after winning the bid.

The same report also stated that Air India is expected to lose a total of $1.5-2 billion over the next two financial years, FY19 and FY20, and that these losses will need to be funded by the Indian taxpayers. And this is in addition to the $4 billion of public funds that have been used to subsidise the airline since 2012.